Q & A: Banking and Finance.

• Position: Industry Outlook

Major challenges facing the banking industry include everything from stiff regulations and concerns over raising capital to a worker shortage, but a positive economic outlook for 2015 is giving Utah's financial execs a lot to look forward to, thanks to the state's business-friendly attitude.

We'd like to thank Hal Heaton, finance professor at Brigham Young University, for moderating the discussion.

Rick Anderson

Bank of American Fork

Bruce T. Jensen

Town & Country Bank

Kent Nelson

Brighton Bank

David Ray

Key Bank

Scott Anderson

Zions Bank

Daniel Briggs

Bank of America Merrill Lynch

Wendy Holloway

Utah Bankers Association

Scott Irwin

Holland & Hart

Steve Kieffer

Big-D Construction

Frank Pignanelli

Utah Assoc. of Financial Services

Nat'l Assoc. of Industrial Bankers

Darryle Rude

Utah Department of Financial Institutions

John Sorensen

Home Savings Bank

George Sutton

Jones Waldo

Jeff Thredgold

Thredgold Economics

What is your general outlook for economics in 2015, both nationally and in Utah?

As far as the U.S. economy, it's doing well. Growth is running around 2.5 percent after inflation. That's the best in about seven years. We would expect something comparable to that in 2015. Unemployment nationwide is 5.8 percent. The news, as is typically the case, is better in Utah. Utah added about 48,000 jobs in the last 12 months. That is a growth rate of 3.7 percent. Unemployment is 3.5 percent. Utah is essentially at full employment.--Jeff Thredgold

THREDGOLD: The outlook for the U.S. is continuation of modest growth. Quantitative easing added about $4 trillion worth of U.S. government mortgage-backed securities. To assist the economy at some point they have to begin a liquidation of those. The Fed has discontinued its quantitative easing program. They will begin to tighten modestly in the middle of 2015. They are giving financial markets a year's worth of notice about tightening that's coming. We will see some modest increase in short-term rates and long-term rates throughout 2015.

BRIGGS: We are very excited about the business outlook in Utah. Utah is consistently ranked nationally and recognized for being the best state in the country for business.

Most importantly, we are hearing it every day when we talk to our clients. Our clients are showing their optimism in the economic outlook each time they decide to buy an extra piece of equipment or every time they decide to buy a building instead of rent the building. They are showing us they are confident and optimistic about the future. We are seeing the business owners in this community grow their businesses and expand beyond the borders of Utah and the U.S.

There's a lot of technological innovation happening in Utah. Not only are companies who are founded here in Utah growing and exploding and venture capital is flowing in constantly, but even the large tech companies from outside of Utah are bringing jobs here.

When I ask my clients about interest rates and their concerns, they are more concerned about the demand for their products and services and what's happening in Europe and other places. As long as that demand increases, then they will continue to grow.

RAY: One of the bright spots may be the fact that the U.S., even though we are only looking to grow at 2.5 percent, is probably going to be one of the better growth rates around the world, especially when you look to Europe. Hopefully you will continue to see capital inflow to the U.S., and have market forces keeping interest rates somewhat low with that, as well as spurring investment in the United States.

As it translates to Utah, we will continue to see businesses where they are outpaced by demand. In a tight labor market, when we talk to our customers, we hear time and time again, regardless of the industry, that it's hard finding qualified people for open positions to really meet demand they are seeing out there. That's one of the challenges we see. But it will continue to be fairly solid growth in that 3 to 4 percent range.

SORENSEN: I don't see that the Fed will sell any of their portfolio. If they just let the portfolio liquidate over a normal course, half of their balance sheet will be liquidated in the next five years, and that's what I see.

I also do not think interest rates are going to abruptly increase. There's too much pressure in regards to the Fed. I'm anticipating 2015 to be a very great year and that the rates will increase, but they will increase gradually starting in 2016.

There are a total of 6,500 banks in the United States. If you take the top 10 percent, they control 91 percent of all of the assets. In Utah, there are 28 banks, and two of those banks control 94 percent of all of the assets. I'm a small community bank. There continues to be a consolidation of community banks throughout the United States to the tune of about 4 to 5 percent per year. That means in five years, there will be 20 percent fewer banks than there are today.

S. ANDERSON: Interest rates are going to go up. As I try to interpret what the Federal Reserve is saying, if the national economy continues to be steady through the next two years, and if inflation remains under 2 percent, and if unemployment continues to improve, starting next June, the Fed funds rate will start to go up. I wouldn't be surprised if, at the end of 2015, it's at 1.2 or 1.5 percent, where today it's 0 to 0.25.

SUTTON: I 'm on the board of a bank that is consumer finance. Our internal projections are that there's going to be modest growth in consumer sales over the next while.

On interest rates, when I was at a conference recently in Chicago, one of the speakers had a very knowledgeable view of the national economy. When he got to interest rates, his projection was no rise in interest rates. He said even if there's an economic logic to it, the Fed can't let interest rates go up because of the impact on the Federal budget. They may not be able to keep a lid on it, but the projection was that they will try to keep a lid on it as much as they can.

RUDE: Most of the financial institutions in Utah are doing really well. They want to do better. They want to grow faster. Some of the smaller institutions are struggling with getting over the Great Recession and the real estate lending that they were doing at that time, and changing over to new products and services. They haven't found their niche yet, or they haven't...